On The House

Biz List Search

If I borrow $20 from a neighbor, my neighbor is going to expect it back and I’m going to feel
obligated to return it.

Unless, of course, the neighbor is a bank. Then, somehow the equation changes.

Or does it?

One of the most intriguing aspects of the housing crisis is how it illuminates ethical
perceptions of borrowing money.

I was reminded of this recently when I received a letter from a reader complaining that her bank
took months to approve the sale of her home for less than she owed.

In addition, she protested, the bank had the gall to keep her loan down payment along with all
the payments she had made on the home and the proceeds from the sale.

Yes, banks are funny that way. They’re in the business of collecting money owed to them. If they
aren’t in that business, they aren’t in business at all.

I’m no apologist for lenders. They made phenomenally bad and greedy decisions during the housing
boom. They pitched poor loan after poor loan to gullible customers because they could pass along
the loans for a quick buck without worrying about the crushing impact the debts might have on
borrowers.

That’s nothing to be proud of.

But neither is borrowing money and not paying it back.

Banks didn’t force homebuyers into borrowing money. Buyers knew, or should have known, how much
they were borrowing and how much their payments would be.

If they lost their job, were divorced or fell ill, my heart goes out to them. Such hardship
changes the ability to pay, although it’s hard to see how it would change the obligation of the
debt, noted Patricia Harned, president of the Ethics Resource Center, a nonprofit ethics research
group in Arlington, Va.

“If you’re having to choose between feeding a family and meeting other obligations, that’s
different from ‘I was given the raw end of the deal, and I don’t have an obligation to pay that,’ ”
Harned said.

“You enter into that legal contract with an intent and a promise. That’s an ethical standard, a
moral standard.”

Strategic defaults of mortgages, in which those who can pay make a calculated decision not to,
further ratchets up the ethical equation.

They reported that the vast majority of Americans — 81 percent — think it is morally wrong to
default on mortgage debt if it can be paid, although that reaction varies a lot.

For example, younger and more educated people — surprisingly — are more likely to think it’s
acceptable to default, while Republicans and wealthier people are more likely to think it’s
wrong.

It might be easier to loosen our moral commitment when our commitment is to a faceless
institution. When we think the institution has acted improperly, it might make it easier still —
but it still doesn’t change what we agreed to do.

“It certainly makes it easier to ask the question, ‘Is it OK for me not to live up to my
obligation if the bank isn’t living up to theirs?’ ” Harned said.

But, she added, “Borrowers borrow money with the intent of paying it back, and if one side
reneges on its commitment, the other isn’t necessarily justified in doing that, too.”